E. Breuninger GmbH & Co. v European Commission (T-525/21)

Contents

Judgment of the General Court (Second Chamber, Extended Composition)21 December 2022^note(Action for annulment — State aid — Framework scheme to establish a federal compensation scheme in Germany for losses caused by lockdown decisions — Decision not to raise any objections — Aid to make good the damage caused by natural disasters or other exceptional occurrences — No interest in bringing proceedings — Inadmissibility)In Case T‑525/21,E. Breuninger GmbH & Co., established in Stuttgart (Germany), represented by R. Velte and W. Meilicke, lawyers,vEuropean Commission, represented by V. Bottka, G. Braga da Cruz and C. Kovács, acting as Agents,supported byFederal Republic of Germany, represented by J. Möller and P.-L. Krüger, acting as Agents,THE GENERAL COURT (Second Chamber, Extended Composition),composed, at the time of the deliberations, of V. Tomljenović, President, F. Schalin, P. Škvařilová-Pelzl, I. Nõmm (Rapporteur) and D. Kukovec, Judges,Registrar: P. Cullen, Administrator,having regard to the written part of the procedure,further to the hearing on 14 September 2022,gives the following

Judgment

1By its action under Article 263 TFEU, the applicant, E. Breuninger GmbH & Co., seeks the annulment of Commission Decision C(2021) 3999 final of 28 May 2021 on State aid SA.62784 (2021/N) – Germany COVID-19 – Federal compensation scheme (OJ 2021 C 223, p. 25, ‘the contested decision’).

Background to the dispute

2The applicant is the operating company of the E. Breuninger Group, which is active primarily in the clothing sector as well as in the distribution of clothing, perfumes, cosmetics and body care products, furniture, household goods and decorative items.

3On 21 May 2021, the Federal Republic of Germany notified the European Commission, in accordance with Article 108(3) TFEU, of a measure concerning the granting of temporary economic aid for undertakings whose activities had been suspended as a result of the measures taken by the Federal Government and the Länder to deal with the pandemic in Germany in the context of the COVID-19 crisis (‘the federal compensation scheme’).

4On 28 May 2021, the Commission adopted the contested decision.

5In the contested decision, the Commission first described the essential characteristics of the federal compensation scheme. This shows that the scheme:– benefits all undertakings, subject to certain exceptions (such as financial institutions and public undertakings);– has the objective of compensating the loss of profit caused by lockdown decisions due to the COVID-19 pandemic (‘the lockdown decisions’);– has a provisional budget of approximately EUR 10 billion for the year 2021, covers losses incurred between 16 March 2020 and 31 December 2021 as a result of lockdown decisions only, will apply to the whole of Germany and takes the form of direct subsidies that can be granted by administrative authorities at federal, regional and local level;– applies, according to its Article 2(1), in particular to undertakings whose business activity was prohibited by the lockdown decisions and to undertakings whose turnover was at least 80% generated with undertakings whose activity was prohibited by those decisions;– provides, in Article 2(2), that undertakings pursuing mixed activities, some of which are not at all affected by the lockdown, may benefit from the federal compensation scheme only if the prohibited activities represent at least 80% of their turnover;– provides, in Article 3(1), that eligible losses are exclusively those suffered in respect of the prohibited activities or a severable part of the activities of the undertakings affected by the lockdown decisions, and is represented by the difference between the operating profit during the periods affected by those lockdown decisions and the corresponding periods of 2019;– provides that the income generated by the shift of the activity to another related economic activity must be taken into account in order to avoid situations where undertakings benefit from an advantage due solely to consideration of the losses incurred in the activities affected by the lockdown decisions;– has several characteristics designed to limit the amount of aid paid to the minimum necessary;– provides that, if the aid is to be paid on the basis of anticipated losses, the actual amount of those losses will be verified ex post and any excess compensation will be reimbursed.

6The Commission then examined the compatibility of the federal compensation scheme with Article 107 TFEU.

7First, the Commission noted that the federal compensation scheme falls within the scope of Article 107(1) TFEU.

8Second, the Commission found that the federal compensation scheme was compatible with the internal market in application of Article 107(2)(b) TFEU.

9It was noted, first of all, that the COVID-19 pandemic constituted an exceptional occurrence within the meaning of Article 107(2)(b) TFEU.

10It was then held that, in view of the definition of eligible losses used by the federal compensation scheme, there was a causal link between the COVID-19 pandemic and the losses compensated, since only losses caused by measures precluding the beneficiaries, de jure or de facto, from continuing their business activities were compensated.

11Finally, the Commission examined the proportionality of the federal compensation scheme and found that this condition was met, since the characteristics of the scheme ensured that the aid paid was proportionate to the losses suffered as a result of the COVID-19 pandemic.

12The Commission therefore decided not to raise any objections to the federal compensation scheme.

Form of orders sought

13The applicant claims that the Court should:– annul the contested decision;– order the Commission to pay the costs.

14The Commission and the Federal Republic of Germany contend that the Court should:– dismiss the action as unfounded;– order the applicant to pay the costs.

Law

15By the present action, the applicant is seeking the annulment of the contested decision on the ground that that decision approved the federal compensation scheme, which, in Article 2(2), excludes from eligibility undertakings operating in different sectors of activity if the sectors affected by the lockdown decisions adopted in respect of the COVID-19 pandemic represent less than 80% of their turnover.

16In support of the action, the applicant puts forward two pleas in law. By the first plea, it argues, in substance, that, by endorsing the eligibility condition whereby the sectors of activity affected represent at least 80% of the turnover of the undertakings concerned, the Commission has breached the principle of proportionality. By the second plea, it considers that the Commission has also infringed Article 108(2) TFEU by failing to initiate the formal examination procedure, despite the existence of serious difficulties.

17Since the conditions governing the admissibility of an action relate to the absolute bar to proceeding with an action, the Court must determine of its own motion whether the applicant has an interest in the annulment of the contested decision (see, to that effect, order of 7 December 2017, Troszczynski v Parliament, T‑148/17, not published, EU:T:2017:921, paragraph 40 and the case-law cited).

18The Court considers it necessary first to examine the admissibility of the action from the point of view of the existence of an interest on the part of the applicant in seeking annulment of the contested decision.

19To that end, the applicant was asked to state, by way of a measure of organisation of procedure adopted on the basis of Articles 89 and 90 of the Rules of Procedure of the General Court, whether it had an interest in bringing an action for annulment of the contested decision and, consequently, whether the action was admissible, in the event that the condition laid down in Article 2(2) of the federal compensation scheme did not apply to it.

20In accordance with settled case-law, an action for annulment brought by a natural or legal person is admissible only in so far as that person has an interest in the annulment of the contested act. Such an interest requires that the annulment of that act must be capable, in itself, of having legal consequences and that the action may therefore, through its outcome, procure an advantage to the party which brought it (see judgment of 17 September 2015, Mory and Others v Commission, C‑33/14 P, EU:C:2015:609, paragraph 55 and the case-law cited).

21First, it should be noted that the applicant’s action is based on the incorrect premiss that it was not eligible for the federal compensation scheme on account of the condition laid down in Article 2(2) of that scheme.

22Under Article 2(1)(b) of the federal compensation scheme, as summarised by the Commission in recital (20)(a) of the contested decision, ‘the bodies granting the aid may grant aid to private undertakings … if … their economic activity is affected by the Coronavirus lockdowns in the following manner: … their commercial or economic activity had to be suspended by virtue of a closure decision taken on the basis of a lockdown order’.

23As the Commission noted in recital (21) of and footnote 21 to the contested decision, Article 2(2) of the federal compensation scheme provides that ‘in the case of undertakings operating in several sectors of economic activity, at least 80% of their combined turnover must be clearly attributable to economic activities directly affected by the lockdown’.

24Finally, Article 3(4) of the federal compensation scheme, the substance of which is recalled in recital (23) of the contested decision, provides as follows:‘If the effect of a lockdown measure relates to a targeted economic activity and the economic activity is therefore shifted to another related economic activity or source of income, the income from that other related or linked activity is then also taken into account in the form of an ordinary charge. Therefore, no advantage can be obtained from the fact that only targeted economic activities affected by the lockdown are considered in the case that other economic activities have become more profitable as a result of that shift. Excess compensation of the damage caused is thus excluded.’

25The applicant submits that Article 2(2) of the federal compensation scheme has the effect of excluding it from eligibility for that scheme. On the one hand, it points out that it is active in both physical retailing and online trading, which constitute different sectors of economic activity within the meaning of that provision. On the other hand, it states that the portion of its turnover represented by online trading, which was unaffected by the lockdown decisions ordered during the COVID-19 pandemic, means that it does not meet the 80% threshold required by that provision. In its pleadings, it points out that its exclusion from the scheme meant that it was unable to apply for financial assistance under Überbrückungshilfe III, namely the federal aid programme adopted by the German authorities under the scheme (‘the federal aid programme’).

26However, it must be observed that the Federal Republic of Germany is correct in arguing that this interpretation of Article 2(2) of the federal compensation scheme is contrary to the one it has published. It appears from that published text that physical retail trading and online trading are not considered to be different ‘sectors of economic activity’ within the meaning of that provision. On the contrary, online trading is seen as an ‘economic activity related’ to physical retail trading within the meaning of Article 3(4) of that scheme.

27Consequently, the size of the applicant’s turnover from online trading is not such as to render it ineligible for State aid under Article 2(2) of the federal compensation scheme. It requires only that, under Article 3(4) of that scheme, the additional revenue earned by the applicant in those online trading activities as a result of the lockdown decisions must be taken into account for the purpose of avoiding excess compensation for the loss it suffered as a result of those decisions.

28Second, it became apparent from the discussions in the course of those proceedings that the fact that it was impossible for the applicant to obtain financial assistance under the federal aid programme was in fact due to the addition by the German authorities – unilaterally and independently of the federal compensation scheme that had been notified to the Commission – of an eligibility condition whereby at least 30% of the applicant’s total turnover must have been affected by the lockdown decisions, which the Federal Republic of Germany confirmed in its reply to a measure of organisation of procedure sent to it.

29In its response to the measures of organisation of procedure, the applicant sought to link the eligibility requirement whereby at least 30% of turnover must have been affected by the lockdown decisions to the federal compensation scheme, as declared compatible with Article 107(2)(b) TFEU in the contested decision. On that point, it is sufficient to observe that such a condition is neither expressly nor implicitly included in the federal compensation scheme because of a reference to conditions appearing in other notified aid schemes.

30Third, the addition by the Federal Republic of Germany of a further eligibility condition – namely an allocation of at least 30% of turnover in order to benefit from its federal aid programme – is irrelevant to the examination of the present action, which exclusively concerns the legality of the contested decision, by which the Commission declared the federal compensation scheme to be compatible with Article 107(2)(b) TFEU.

31In that regard, it must be observed that, according to settled case-law, the implementation of the system of monitoring State aid, as laid down in Articles 107 and 108 TFEU, is a matter for both the Commission and the national courts, their respective roles being complementary but separate. While the assessment of the compatibility of aid measures with the internal market falls within the exclusive competence of the Commission, subject to review by the Courts of the European Union, it is for the national courts to ensure the safeguarding, until the final decision of the Commission, of the rights of individuals faced with a possible breach by State authorities of the prohibition laid down by Article 108(3) TFEU (see, to that effect, judgment of 26 October 2016, DEI and Commission v Alouminion tis Ellados, C‑590/14 P, EU:C:2016:797, paragraphs 95 to 97 and the case-law cited).

32In that context, it is open to the applicant to bring an action before the German courts, which will have to examine, if necessary after having referred a question to the Court of Justice for a preliminary ruling on interpretation under Article 267 TFEU, whether the addition of a supplementary eligibility condition by the German authorities is akin to the alteration of existing aid within the meaning of Article 4(1) of Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EU) 2015/1589 laying down detailed rules for the application of Article 108 [TFEU] (OJ 2004 L 140, p. 1), and thus to new aid within the meaning of Article 1(c) of Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 [TFEU] (OJ 2015 L 248, p. 9), subject to the notification requirement under Article 108(3) TFEU.

33In the light of all of the foregoing, based on Article 2(2) of the federal compensation scheme, as declared compatible with Article 107(2)(b) TFEU in the contested decision, the applicant was eligible for aid under that scheme. Thus, the annulment of that decision would not procure any advantage for the applicant under the case-law cited in paragraph 20 above. Therefore, the applicant’s action must be dismissed as inadmissible for lack of interest in bringing proceedings.

Costs

34Under Article 134(1) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings.

35Since the applicant has been unsuccessful and the Commission has applied for costs, the applicant must be ordered to pay the costs.

36Under Article 138(1) of the Rules of Procedure, the Member States and institutions which have intervened in the proceedings must bear their own costs. The Federal Republic of Germany must therefore bear its own costs.

Operative part

On those grounds,THE GENERAL COURT (Second Chamber, Extended Composition)hereby:

1.Dismisses the action;

2.Orders E. Breuninger GmbH & Co. to bear its own costs and to pay those incurred by the European Commission;

3.The Federal Republic of Germany shall bear its own costs.

Delivered in open court in Luxembourg on 21 December 2022.